Shareholders warned to stay in touch

Private investors in small companies should keep in constant contact with the management if they want to avoid any nasty surprises, the receiver to defunct dairy firm Amelca has warned.

Listed on the junior exchange Ofex, Amelca, a £20m dairy processing factory at Foston, Derbyshire, had raised money from private investors, including many local farmers, in two rounds of fundraising between January 2001 and March 2002 using a tax efficient enterprise investment scheme (EIS).

But the directors of Amelca, which was advised by Matrix Corporate Finance, called in the receivers in August 2002 after a series of production and market problems prompted the Bank of Scotland to call in its multi-million pound loan.

The business is expected to emerge from receivership in the next two months but there is likely to be no money left for the unsecured creditors or shareholders.

But for some of the shareholders this article may be the first time they have read anything about their investment. Unless a company is liquidated, no one is obliged by law to let them know what is happening.

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One shareholder recently wrote to The Daily Telegraph stating: "It seems appalling that the receivers and the bank who appointed them, can be so off-hand with those who are involved in an enterprise and who are, in fact, the owners of that enterprise."

Ken Vere Nicoll, managing director of Matrix's corporate finance division, said he had written as a goodwill gesture to inform the firms of independent financial advisers who had invested clients' funds in the scheme in August 2002, a week after the administrative receivers were appointed.

"We got as far as a draft but as soon as the administrative receiver came in he refused. It is something that concerns me," he said.

Joint receiver, Bob Maxwell, partner at accountant Deloitte's Midland practice, denied that he blocked attempts to write to the shareholders.

He said that because of the high profile nature of the business failure - Margaret Beckett, Secretary of State for the Environment, Food and Rural Affairs, had formally opened the plant in May 2002 - he did post notices to inform shareholders on the Ofex information board.

Mr Maxwell said he was under no legal obligation to communicate with the shareholders. His job was to recover as much money for the secured creditors.

He advised investors in small, "high risk" companies to "keep in regular contact with management to understand if the business is performing on plan and if not why not? If you don't keep an eye on it you are putting your investment at risk."